If state lawmakers really want a clear picture of what Medicaid expansion under Obamacare will look like, they should start with Arizona, where expansion was tried more than a decade ago — with disastrous results.
In 2000, Arizona received a federal waiver to extend Medicaid to all childless adults and parents earning less than 100 percent of the federal poverty level. This is nearly the same group that would be eligible for Medicaid under the federal health care law, except that Obamacare would include those earning up to 138 percent of the federal poverty level, a slightly larger group.
At the time, Arizona lawmakers and expansion advocates promised that expanding Medicaid would lower the uninsured rate, reduce uncompensated care costs, decrease the “hidden tax” on private insurance for uncompensated care, and save about $30 million a year in state funds.
These same promises — lower uninsured rate and reduced uncompensated care costs — are being made by those calling for Medicaid expansion in other states.
None of the promises came true. In fact, the opposite happened. Enrollment of parents was more than triple what was forecast, while enrollment of childless adults was more than double.
As a result, costs skyrocketed. Spending per enrollee was much higher than anticipated, especially among childless adults, who proved to be twice as expensive to cover as parents. By 2008, Arizona had spent $8.4 billion on Medicaid expansion — more than four times what had been forecast.
What about the promise that expansion would lower the uninsured rate? In 2002, about 18.7 percent of Arizona’s non-elderly population was uninsured. By 2011, that group had actually increased to 19.4 percent. Meanwhile, the percentage of Arizonans with private insurance dropped from 61.8 percent to 55.5 percent, while Medicaid enrollment grew far beyond what had been predicted.
When the recession hit in 2008, Arizona faced a budget shortfall and scaled back Medicaid benefits for childless adults, including organ transplantation. It later froze enrollment for that group, which dropped from 227,000 to 86,000.
Arizona Gov. Jan Brewer’s January announcement that she will support the Obamacare Medicaid expansion should not have come as a surprise. Arizona’s waiver expires in 2013, and the state had no choice but to go along with expansion. If it did not, the feds would likely not renew the state’s waiver, which would force some 86,000 people out of the Medicaid program and into the ranks of the uninsured.
The Arizona experience is not unique. In 2002, Maine implemented an almost identical Medicaid expansion — with almost identical results. Within two years, enrollment was more than double what had been forecast, with childless adults costing more than four times as much as parents. Between 2002 and 2011, the uninsured rate remained the same, while the share of those with private insurance shrank, from 66 percent to 59 percent.
Proponents of Medicaid expansion claim it will reduce the uninsured rate and therefore reduce uncompensated care costs. The hope and expectation is that federal expansion dollars will free up state funds and relieve taxpayers, much like advocates of expansion hoped for Arizona and Maine.
Earlier this month, Methodist Health Care Ministries and Texas Impact published an estimate of Medicaid expansion savings. At first glance the figures are impressive; some $900 million in state funds could be freed up for the upcoming biennium, according to the report. The groups’ earlier study claimed counties and local taxpayers could expect relief from having to pay for uncompensated care costs, which the report said would decrease dramatically with Medicaid expansion.
But these projections are in fact nothing more than thin hopes. In Arizona, uncompensated care costs increased by an average of nine percent each year after expansion, and in Maine charity care rose from $40 million in 2000 to $215 million 2011.
Other states that have toyed with expansion — Delaware, Oregon, Michigan, Utah — have all had similar experiences: costs and enrollment exceeded expectations, uninsured rates stayed the same or increased, and the number of people on private insurance shrank.
If states are the incubators and laboratories of public policy, then the results of decade-long experiments with Medicaid expansion are in. In Arizona, Maine, and everywhere expansion was tried, none of the promised benefits materialized.
If lawmakers in other states choose to go down the road of expansion, they now know what to expect: skyrocketing costs, huge enrollment growth, a static uninsured rate, and more — not fewer — uncompensated care costs. Just ask Arizona.
John Davidson is a policy analyst for the Center for Health Care Policy with the Texas Public Policy Foundation, a non-profit, free-market research institute based in Austin. He may be reached at jdavidson@texaspolicy.com.